Digital Dragon: The evolution of ITs and ICTs in China

Introduction:

In the previous essay a superficial outline of the historico-material contexts in which China came to be a nation state, had been outlined. With Deng Xiaoping’s premiership in the 70s and 80s came perhaps the most defining moment in China’s recent economic history where “Socialism with Chinese Characteristics” ascended to prominence as the guiding developmental philosophy. At this juncture the realisation had been achieved that China would have to open up; in technology, in research, in its economy — it would need to engage with and benefit from global interactions and exchanges, and this would be key to gain ‘actual’ self-sufficiency or independence in those sectors (the “speakers incident” that Moak and Lee spoke of).

A question of “priorities”:

It was in the context of this realisation that the electronics industry in China became one of the first industries to be opened up. It was the first industry to see the entry of and experience the establishment of private enterprise, and the influx of foreign capital (Zemin, 2008, p-24), when in the 1980s and 90s, the government implemented large-scale reforms, with the aim of establishing a “socialist market economy” with a definitive export-orientation. The government at the time, under Jiang Zemin, the then premier, had understood deeply, the multiplier and accelerator effects (Zemin, 2008, p-7) that building the IT sector would produce, in nearly all developmental arenas, from defense to the “informationisation”(Zemin, 2008, p-10 ) of the economy. In 1984, the concrete aim of IT development, was therefore to “build a foundation, raise our level, improve quality, pursue profits, octuple the gross output value, and get 10 years ahead of the rest of the national economy” (Zemin, 2008, p-22). This thinking was not borne out of hoary techno-optimism, there were numbers to match it. With Moore’s law in full force, the seamless pace of technological innovations, had produced an economic reality where they accounted for nearly three-quarters of all economic growth in developed nations (Zemin, 2008, p-8). And IT as a sector was not just aiding this growth, it was contributing to 7.2% of the global GDP (Zemin 2008, p-7), and added 1.38 billion yuan value to the Chinese GDP in 2007 (Zemin, 2008, p-22).

By the 2010s, this need for ‘techno-independence’ would turn into a “quest for high-tech dominance” (Hout and Ghemavat, 2010), whose trajectory this essay seeks to explore. It is critical to understand that these ambitions in China, which are articulated in Zemin’s writing, come after decades of serving as a global factory, and now possessing a market, globally craven. Apart from its economy, which had been growing consistently for decades, in military and foreign power too, it was now challenging the unipolar world order of the Americans. So to understand how the IT sector shaped up in China would need an understanding of how China views and engages with the world, and how technology is seen as a key component of global power.

From ‘Independence’ to ‘Dominance’:

Hout and Ghemawat equate that relationship to the one between the Chinese state and organised religion, as follows:

“In the city of Shanghai, a few churches conduct daily services for the faithful, just as churches all over the world do. However, China’s Patriotic Catholic Association doesn’t operate under the auspices of the Roman Catholic Church, which the Chinese government has banned. It is controlled by a state agency, the Religious Affairs Bureau. That’s how the Chinese government deals with foreign organizations, be they churches or companies. They are tolerated in China but can operate only under the state’s supervision. They can bring in their ideas if they deliver value to the country, but their operations will be circumscribed by China’s goals. If the value — or danger — from them is high, the government will create hybrid organizations that it can better control. This approach, which never ceases to shock foreigners, guides those who are boldly fashioning a new China.” (Hout and Ghemawat, 2010)

While this aggression, “coercing, cajoling and co-opting” multinationals to share their technologies in with state-owned enterprises, raises questions about the compatibility of Chinese Socialism, with a liberal world order, there is also a commitment to nearly double the spending on R&D by 2020, at an increase of about 21% each year (Hout and Ghemawat, 2010). Hout and Ghemawat talked of this clash, of ideologies and functioning, in the context of nearly all technological exchanges and not just in IT. Zemin’s framing of the objective world as having three constituent elements — “materials, energy and information” (Zemin, 2008, p-12) resonates in how Hout and Ghemawat see China’s drive for techno dominance — it had acquired the first two elements by optimising what it had and buying what it didn’t (Hout and Ghemawat, 2010). And for the third it was ready to take overtly aggressive stances, if that would bring about the desired results. It is key yet again to contextualise the root of such dramatic positions — the authors point out that China’s pushy policies, forcing foreign players to pay burgeoning royalties and share critical intellectual property resources, are borne out of an economic reality of huge trade surpluses with America. A mere 15% of China’s high-tech exports were from its own firms, which were unable to leverage the growing global market for high-tech, and watched global firms make the best use of Chinese capital and resources to drive up profits. This, and the inevitable appreciation of the renminbi, (which would mean a loss of the competitive position that had sustained it for so long) meant that unless China rapidly scaled up the proportion of Made-in-China technology capital and production, its envious growth rates would lose significant steam. While Hout and Ghemawat outline a three pronged strategy that the Chinese state used in dealing with this situation in other technology sectors such as railways or renewables, there were no simple or straightforward solutions to this imbalance in the IT sector.

In the 2000s, homegrown IT firms were simply not in a position to compete with global players, as seen in their paltry share of the exports above. Neither was software a technology that was compatible with the kind of “incentivised” joint ventures that were possible with foreign players in other sectors.When, in 2010, the state tried to armtwist companies with regulations to disclose key source codes, the uproar generated was a high point in the friction that continues to this day (Hout and Ghemawat, 2010). Thus there was a growing realisation that not only was such friction proving counterproductive, but far more deeper measures would have to be undertaken to bolster innovation and self-reliance.

Modern Problems require Modern Solutions:

As of 2017, evidence of a continued and reinforced belief in the ICT sector as key for all development is found in its placement as a sector of the “highest priority” in the 13th FYP (Hong, 2017, p-1756). In the preceding years, China had witnessed, if not a drastic slowdown, certainly a worrying decline, in its growth rate. That this was taking place in the context of a second significant economic shift, that of reorienting from export to domestic consumption as the key economic driver, is noted. The focus was now on new and emerging technologies, the Internet infrastructure to support their penetration and use, and a firm conviction that “innovation based, balanced, green, and open economic growth” was the path to follow (Hong, 2017, p-1755). To Hong, this reorienting will produce, from the friction outlined above, a new digital capitalist world order. However, this order, within which China will clamber for power and influence, will be, as echoed by Hout and Ghemawat, one where the contradictions of the export and investment heavy model may be overcome, but new contradictions will emerge from the churn, “perhaps equally severe” (Hong, 2017, p-1756). This is a period, where:

“the debate is not about accepting market forces or not, but whether they can be saddled and yoked to the party’s preference, especially for the sake of strengthening the economic foundation of the party’s ruling at home and enhancing China’s position in the hierarchical structure of global capitalism”. (Hong, 2017, p-1756)

Right from the 90s, the five year plans systematically compounded the prioritisation of ICT in development, from the gradual opening up of the electronics industry, its ascent to a “pillar industry” and finally in the latter half of the 2000s, a focus on upgradation and investment in ICTs to continue apace the process of “informationisation” (Hong, 2017, p-1758). To Hong, this policy vision of using ICTs to achieve large scale economic transformation, in the aftermath of the 2008 financial crisis is significant as it is the first time that “cultural industries” are being conceived of as “economic pillars” (Hong, 2017, p-1758). By 2017, in the 13th Five Year plan, there is the first reference to the increasing techno-economic prioritisation of networked ICTs as “strategic emerging industries” (Hong, 2017, p-1759). Alongside this focus on ICTs comes along with the shift to supply-side reforms and interventions, where consistent upgradation and innovation would have to take centrestage, with nearly 75 industries being targeted to stimulate the process. From big data and quantum computing to modernising agriculture, the role of the state is conceptualised as a facilitator for the deep and expansive embeddment of ICTs into “the economy and social life”, by progressing on the “Made in China 2025” front. This program, which is given continued emphasis in the 13th FYP, is aimed at producing phenomenal growth, to the tune of 10 trillion yuan in six strategic industries. Thus the state aims to produce growth not just in ICTs, but also in the economic spaces and opportunities it can generate and its immense modernising potential.

The first key step was therefore to create, a “strong network nation”, for which nearly 2 trillion yuan was to be spent on strengthening information networks and infrastructure. There is however, as Hong illustrates, a political economy of ICT, which is dynamic and is seeing multiple shifts in power. One of the most key shifts is that of power from the telcos to Internet based companies and applications, what Schiller calls “Web oriented communications commodity chains” (Schiller, 2014 in Hong, 2017, p-1761). These new centres of power have to navigate between two complex structures — the “liberalised market economy”, which is “outward looking and inclusive”, and the “state controlled economy inside the system” (Hong, 2017, p-1761). While the former has seen the mushrooming of a “quasiliberalised” cyberspace, the latter has achieved some preemptive successes, such as the infrastructural readiness for the 5G era which began as early as 2016. This resulted in Huawei, a Chinese origin firm aiming to commercialise its ITU approved 5G technology in 2020, a success of the kind that Hout and Ghemawat had anticipated the Chinese would desire. The switch to IPv6, from IPv4 as a part of the Chinese Next Generation Internet Program, aimed at challenging the dominance of American addresses is another such example of a need to compete globally.

These represent some of the outward challenges to China’s digital ascent, there are also other internal complexities to resolve. While on the one hand, the state seeks to create an expansion in the “Internet-based economic space”, this is a process with potentially disadvantages to the state’s own interests. The Chinese state controls nearly all the data there is, located in the cloud facilities of the vast western industrial belt cities, and has prohibited companies operating in China from storing their data elsewhere, creating friction over how data can be traded. This has fuelled the development of data-rich behemoths like Alibaba and Tencent which now stand to become major gateways to public services and civic data (Xin, 2015 in Hong, 2017, p-1764). With great power, comes more power — this adage would explain the political accomodation and ease that is now granted to these ‘data behmoths’. Hong cites the Tencent CEO raising at the 2016 NPC a demand for, among other things “a lower entry barrier for the Internet industry to build online personal medical files and to participate in graded diagnosis and treatment services” (Xu, 2016, in Hong, 2017, p-1764). Another example of the decreasing checks on their power is the freedom given to ride hailing apps to price and to pay drivers “flexibly”, along market determined lines and not government mandated minimums, which in the time of growing labor discontent is alarming.

Conclusion:

The battles with data behemoths are just one of the several structural flashpoints of conflict and convergence that dot the evolution of ICTs in China. While on the one hand, the state seeks to utilise the immense transformative powers of ICTs to produce a developed “digital China”, its structural and organisational pattern produces points of friction with local and foreign players, in an industry which is synonymous with globalisation. It is willing to limit its own control and accept its weaknesses, as seen when it incentivises joint-ventures, and encourages local firms to seek global competitiveness, however it is also not above producing a regulatory maze, and engaging aggressively with states and firms to achieve that. As Hong surmises, it is making a “dangerous balancing act when prioritizing technology, innovation, and structural reforms on the one hand, and trying to contain disruptive impact on the already delicate labor and social relations on the other”. While China tries to forge a decisive path and space for itself in the digital capitalist order, it must face the challenges of new internal social and economic conflicts, unanticipated shifts of power and inescapable, even self-driven, geopolitical-economic upheavals.

REFERENCES:

Hong, Y. (2017). Reading the 13th Five-Year Plan: Reflections on China’s ICT Policy. International Journal of Communication, 11, 1755–1774. Retrieved from https://ijoc.org/index.php/ijoc/article/view/6366

Hout, T., & Ghemawat, P. (2010, December). China vs the WORLD: Whose technology is it? Retrieved March, 2021, from https://hbr.org/2010/12/china-vs-the-world-whose-technology-is-it

Xin, J. (2015, May 21). Like the wind, Mr. Ma’s enclosure in “Internet +.” 21st Century Business Herald. Retrieved from

http://m.21jingji.com/article/20150521/2a0e60bfdd8dc4e5126f8a10b2e2b6f5.html

Xu, J. (2016, March 4). “Sharing economy” seen as next big force by NPC deputy. China Daily. Retrieved from http://usa.chinadaily.com.cn/business/2016-03/04/content_23735449.htm

Zemin, J. (2010). On the development of China’s information technology industry. In On the development of China’s information technology industry (pp. 3–45). Burlington, MA: Academic Press.